The American Chemistry Council (ACC) US Chemical Production Index rose by 0.7% in January 2013 following a revised 0.9% increase in December 2012. Chemical production rose in all regions for the second consecutive month. Compared to January 2012 total chemical production in all regions was up 0.9%. The outlook for 2013 is sluggish, with increase of approximately 2% foreseen.

The ACC’s Chemical Activity Barometer(CAB) for February 2013 showed slow expansion, with a 0.6% gain over January. The year over year monthly moving average showed an increase of 2.9% compared with January 2012.

Senator Lisa Murkowski (R, AK) introduced an energy policy plan that includes drilling in ANWAR and opening the coasts of the Carolinas, Georgia, and Virginia to leasing.

The Carlyle Group completed its acquisition of DuPont Performance Coatings for $4.9 billion. The new organization will be known as Axalta Coating Systems.

The BPA issue surfaced again recently with a toxicology analysis of 150 studies by the Department of Energy that found that the amount of bisphenol A used in plastic bottles and food containers is too little to account for negative effects on humans.

Air Products and Chemicals installed a $400 million demonstration-scale carbon capture system that can reduce carbon dioxide emissions at Valero’s Port Arthur, Texas refinery by approximately one million tons per year.

Senate Environmental and Public Works Committee Chair Barbara Boxer (D, CA) and Sen. Bernie Sanders (I, VT) have proposed a bill that would tax carbon dioxide emissions of major industrial facilities, including natural gas processing plants. Their plan would charge a $20 tax for every ton of CO2 emitted beyond a set limit.

Plastic film recycling increased 4% in 2011 reaching 1 billion pounds annually for the first time. The category includes plastic bags, product wraps, and commercial shrink film. It was reported that recycling of plastic film has increased 55% since 2005.

A federal judge ordered that the Department of Health and Human Services meet with the ACC on February 27 regarding whether or not the department and its agencies have fulfilled ACC’s Freedom of Information Act request regarding a study on formaldehyde.

US chlor-alkali operating rate for January 2013 was reported at 80% of capacity, essentially the same as December’s 81%. In January, the UN Environmental Program’s Mercury Convention passed a set of legally binding measures accepted by more than 140 countries. It was agreed that there will be a mandatory deadline for phasing out mercury cells in chlor-alkali production by 2025. The EU deadline is 2020.

The federal government is implementing procedures to stop China, Russia, India, and other nations from stealing trade secrets worth billions of dollars from US businesses. Thefts of information from DuPont and Dow Chemical were cited as examples.

Officials from the US and the European Union stated on February 13 that they were moving ahead on major issues to resolve a US-Europe trade agreement. Such an agreement would lower/reduce import duties as well as reach agreement on regulations governing many industries including chemicals and drugs. The UN is moving towards this with its Globally Harmonized System of Classification and Labelling. Finalization is possible before the end of 2014. The ACC has strongly endorsed the initiative.

The European Commission has said that REACH chemical legislation has affected the prices of some chemicals in Europe. It was reported that the cost of complying with this legislation has discouraged some companies from competing.

Great Britain’s pound sterling has fallen 4% against the dollar and 8% against the euro since October 1, 2012 in spite of the government’s success in reducing expenditures. From 2009 to 2012 UK government expenditures rose a total of 1.6% compared to the US rate of 7.9%. The country’s credit rating was recently downgraded by Moody’s from Aaa, the highest possible, to Aa1.

Unemployment in the eurozone was reported at 11.7 % in December.

The German economy registered a contraction of 0.6% in the fourth quarter and grew by 0.7% for all of 2012, compared with a positive 3% in 2011. Economists are confident that the German economy will start expanding again in the first quarter.

In France, the economy shrank by 0.3% in the fourth quarter, which was weaker than expected. France’s economic growth for 2012 was zero.

Russia has become the world’s largest gold buyer, with its central bank having acquired 570 metric tons in the past decade. The Russian cache of 958 tons is the world’s eighth largest; the US is first with approximately 8,000 tons.

China surpassed the US last year in order to become the world’s largest trading nation as measured by the sum of imports and exports. US exports and imports of goods totaled $3.82 trillion in 2012; China’s government reported trade in goods of $3.87 trillion. China’s export growth in January rose 25% from a year earlier.

Since 2008, China’s total public and private debt has grown to more than 200% of GDP, yet the consensus shows little risk to continued economic growth.

The recent announcement of the merger of American Airlines and US Airways will be the world’s largest air carrier, keeping the American Airlines name. It will be run by US Airways CEO Doug Parker. When the merger is completed, American, United, Delta, and Southwest will control about 75% of US airline traffic.

One of the worst droughts in decades along the Mississippi River caused mounting concern in the new year among shippers and navigation experts who were faced with the threat of a halt or reduced barge traffic on the river. If river traffic were shut down, industry experts said that 8,000 jobs could be affected, cost $54 million in wages, and halt the movement of 7.2 million tons of commodities with a value of $2.8 billion.

The Association of American Railroads announced that US Class I railroads originated a record 233,811 carloads of crude oil in 2012, up 256% from the 65,751 carloads in 2011. Mixed carload traffic on major US railroads for the week ending 2/16/13 declined 1.2% year over year. Intermodal volume was up 13.6% compared with the same week last year.

The American Trucking Association reported that seasonally adjusted for-hire truck tonnage increased 2.9% January after increasing an adjusted 2.4% in December.

SHALE OIL & GAS-RELATED

Company representatives stated that BASF and Lanxess are reviewing building petrochemical facilities in the US in order to take advantage of cheap natural gas.

New York Governor Cuomo missed another deadline for completing a report on the environmental impact of hydraulic fracturing (fracking.) Some observers say that nothing will happen until 2014.

Occidental Petroleum Corp. (Oxy) has applied to build an ethylene plant in Ingleside, Texas, the latest company to consider new capacity in the region as generous gas supplies cut costs for chemical producers. Construction is expected to start in December 2014 with production beginning in early 2017.

The Institute for Energy Research has said that potential revenues from giving oil and natural gas drillers more access to public lands are much greater than the Congressional Budget Office’s estimates. According to the IER, the nation’s gross domestic product would increase by $127 billion annually for the next seven years through expanded development.

Shell Chemicals is still considering moving ahead with construction of a petrochemical plant in Pennsylvania.

Researchers at MIT have developed a process of treating water byproducts from the oil and natural gas industry through humidification dehumidification.

 

THE ECONOMY

The Congressional Budget Office reported that the federal government incurred a budget deficit of $295 billion for the first four months of the fiscal year 2013 (that is, October 2012 through January 2013), $54 billion less than the shortfall recorded in the first quarter of last fiscal year. The US Treasury Department reported that on February 25, 2013 the federal debt was $16.62 trillion. It was $5.7 trillion in 2001.

The White House missed the legal deadline of February 4 for sending a fiscal 2014 budget to Congress. A budget official said that submission will happen in mid-March. The Senate last passed a budget resolution in 2009.

As of February 27, there was a continuing impasse between the Congress and the White House regarding automatic budget cuts (sequestration) scheduled to be implemented on March first. Sequester focuses on the portion of the budget that funds operating accounts for federal agencies and departments, including the Department of Defense.

The US government debt held by foreign entities is a record $5.55 trillion, with China holding $1.20 trillion of it, or approximately 21.6% of all the debt owned by foreign entities. In January 2009 the US government owed $3.07 trillion to foreign entities. China remains the top creditor. Japan is a close second, holding $1.12 billion.

The Bureau of Economic Analysis advance estimate of the fourth quarter 2012 Gross Domestic Product showed a decrease of 0.1% at an annual rate that is from the third quarter to the fourth quarter. In the third quarter, real GDP increased 3.1%. In the second quarter, real GDP increased 1.3%. Current-dollar GDP, the market value of the nation’s output of goods and services, increased at a rate of .05% or $18 billion in the fourth quarter to a level of $15,829 .0 billion. In the third quarter current dollar GDP increased 5.9% or $225.4 billion.

The Conference Board’s Leading Economic Index rose 0.2% in January to 94.1 (2004=100) following a 0.5% increase in December and no change in November.

The Conference Board Consumer Confidence Index which had declined in November and December fell again in January. It stands at 56.8 (1985=100) down from an adjusted 66.7 in December.

The Institute for Supply Management’s Manufacturing Index increased 2.9% to 53.1% in January, showing expansion for the second consecutive month. A reading above 50% indicates that the manufacturing economy is generally expanding. The Non-Manufacturing Report for January was 55.2%, 0.5% lower than the 55.7% registered in December but still indicating continued growth.

In January, retail and food services sales adjusted for seasonal variations were $416.6 billion, an increase of 0.1% from December 2012 and 4.4% above January 2012. November 2012 through January 2013 sales were up 4.5% from the same period a year ago.

Privately owned housing starts in January of 890,000 were 8.5% below the revised December estimate of 973,000 and were 23.6% above the January 2012 rate of 720,000. Single family housing starts in January were at a rate of 613,000 or 0.8% above the revised December figure of 608,000. New home sales increased 15.6% in January to a seasonally adjusted annual rate of 437,000. This was 28.9% above the January 2012 estimate of 339,000.

The National Association of Realtors reported that sales of existing homes rose in January and left the supply of homes at its lowest level in 13 years. This was taken as a sign that steam is gathering in the US housing market. Sales of existing homes rose 0.4% in January to a seasonally adjusted annual rate of 4,920,000 units. The national median existing home prices rose in January, up 12.3% from a year earlier.

New orders for manufactured durable goods in January decreased $11.8 billion or 5.2% to $217 billion. This followed four consecutive monthly increases.

January unfilled orders for manufactured durable goods decreased $2.1 billion or 0.2% to $989.2 billion. This followed four consecutive monthly increases.

Consumer Price Index for all urban consumers was unchanged in January on a seasonally adjusted basis. The US Bureau of Labor Statistics reported that over the last twelve months the all items index increased 1.6 % before seasonal adjustments. The energy index fell 1.7% in January, but other indices such as food and shelter increased, resulting in the all items index being unchanged. However, the gasoline index was on its way up in February.

The Producer Price Index for finished goods increased 0.2% in January, seasonally adjusted, following a decrease of 0.3% in December and 0.4% in November. On an unadjusted basis, prices for finished goods increased 1.4 % for the twelve months ended in January 2013.

Interest rate: Prime at 3.25%, unchanged since 12/16/08.

Inflation: Inflation rate in January reported at 1.6%. The December rate was 1.7%, November rate was 1.8%. The October rate was 2.2%, September rate was 2.0% and the August rate was 1.7%. The average rate was 2.1% was reported for 2012. It is expected to rise slightly in 2013 to approximately 2.3%.

Industrial production decreased 0.1% in January, after having risen 0.4% in December. At 98.6% of its 2007 average, total industrial production in January was 2.1% above its year-earlier level. Capacity utilization rate for total industry decreased to 79.1%, a rate1.1% below its 1972 – 2012 average.

Unemployment: The January 2013 rate was essentially unchanged at 7.9% as reported by the Bureau of Labor Statistics. The number of unemployed persons increased 157,000 to12.3 million. The BLS stated that the long-term unemployed, i.e., jobless for 27 weeks and over was essentially unchanged at 4.7 million. Those individuals accounted for 38.1% of the unemployed. North Dakota continued to lead the nation with the lowest state unemployment rate in December of 3.2%; Nevada and Rhode Island were both reported highest at 10.8%. The Federal Reserve announced on December 20 that it would hold interest rates near zero until it hit the target of 6.5% unemployment.

The goods and services deficit was $540.4 billion in 2012, down from $559.9 billion in 2011. As a percentage of US gross domestic product, the goods and services deficit was 3.4% in 2012, down from 3.7% in 2011. Both imports and exports increased during the year.

Crude Oil: Present WTI spot price ~$93 – 96/bbl, compared to ~$100+/bbl a year earlier.  OPEC has reduced production and that isn’t likely to change short term. OPEC outlook shows a reduction in demand.

Natural Gas:  Henry Hub spot price closed on February 22 at $3.34/MMBTU.  February 2013 contract reported at $3.28/MMBTU. Working natural gas in storage is lower than last year and remains above the five year average

The US dollar trading at 92.5 Japanese yen; $1.31 = euro. The British pound sterling = $1.52. Canadian dollar trading at US$1.03.

Current US gold price quoted at $1595.00/ounce compared to the record price of $1920/ounce in September, 2011.